HUL

DISTRIBUTION NETWORK

Introduction…..

Hindustan  Unilever  Limited  (‘HUL’),  formerly  Hindustan  Lever  Limited  (it  was  renamed  in  late  June  2007  as  HUL).

India's  largest  Fast  Moving  Consumer  Goods  company HUL  is  also  one  of  the  country's  largest  exporters The  mission  that  inspires  HUL's  over  15,000

 employees,  including  over  1,300  managers,  is  to  "add  vitality  to  life.“

HUL  meets  everyday  needs  for  nutrition,  hygiene,  and  personal  care  with  brands  that  help  people  feel  good,  look  good  and  get  more  out  of  life.

Products…..

Analysis of Distribution Network of HUL

We  have  analyzed  the  distribution  network  of  HUL from  the following  aspects:  

1. Evolution  of  HUL’s  distribution  network   2. Transportation  &  Logistics   3. Channel  Design   4. Initiatives  taken  for  channel  member  management   5. Field  force  management   6. Analytical  Framework   7. Financial  Analysis

Evolution of HUL’s distribution Network

The  first  phase  of  the  HUL  distribution  network  had  wholesalers  placing  bulk  orders  directly  with  the  company

The  focus  of  the  second  phase,  which  spanned  the  decades  of  the  40s,  was  to  provide  desired  products  and  quality  service  to  the  company's   customers

The  highlight  of  the  third  phase  was  the   concept  of  "Redistribution  Stockist"  (RS)  who  replaced  the  RWs

Distribution at Villages…

RURAL DISTRIBUTION MODEL

Distribution at Urban Centers…

Distribution  of  goods  from  the  manufacturing  site  to  C  &  F  agents  take  place  through   either  the  trucks  or  rail  roads  depending  on  the  time  factor  for  delivery  and  cost  of  transportation.

Generally  the  manufacturing  site  is  located  such  that  it  covers  a  bigger  geographical   segment  of  India.

 From  the  C  &  F  agents,  the  goods  are  transported  to  RS’s  by  means  of  trucks  and  the  products  finally  make  the  ‘last  mile’  based  on  the  local  popular  and  cheap  mode  of   transport.  

New Distribution Channels…

Project Streamline….

Hindustan lever Network

Mother  Depot  and  Just  in  Time   System  

Leveraging  Information  technology  RS  Net  InitiativeAdexa  iCollaboration  suite

 HUL’s  Turnover  Compared  with  Competitors,  2006

HUL’s  Market  Leadership  across  various  FMCG  Categories

Channel Design

Hindustan  Lever  Limited  (HUL)  has  two   types  of  channel  selling  ‐ 

 i. Regular  (traditional)  retail  channel,   ii.Direct  Selling  Channel  in  the  name  of

 Hindustan  Lever  Network  (HLN).  

Channel structureRedistribution stockists:-

Sales  Margin:  4.76%  which  includes  cash  discount,  unloading  expenses  from  depot,  distribution  expenses  to  retailers,  incentive  schemes  &  other  incidental  expenses.  

Modes  of  transport  used:  Rickshaw,  tempo.  

Incentive  schemes:  Before  2000  holiday  packages  and  tours  but  after  2000  no  non‐monetary  incentive  for  RS.  

Software  systems  and  Information  System:  UNIFY  8.3  (Developed  by  IBM  &  CMC).  This  software  needs  to  be  synchronized  daily  and  the  system  updates  any  information/  incentive  schemes  /  sales  figures  etc  to  and  from  the  common  shared  platform.  

Areas  of  Operations:  Marked  for  each  of  the  RS.  

Selling  Operations:  RSs  sells  the  goods  to  ‐   o Wholesaler  (gets   1.5  %  max.  discount  from  RS)   o Retailers  (gets   1.0%  max.  discount  from  RS)  

Wholesaler:   Gets  cash  discounts  and  other  schemes  promoted  by  HUL  (gets

 points  under  Vijeta  Scheme).    Retailers:   Total  retailer  base  in  Jamshedpur:   Approximately  1070.  

Sales  Margin:  Depends  on  the  product  

o Soap,  detergents  ‐  8%  on  MRP   o Cosmetics              ‐ 10%  on  MRP   o Food  items            ‐  8%  on  MRP

Incentive  schemes:    Company  programs  (Scheme  Discounts  +  Cash  Discounts)   TPR  schemes  based  on  Sales  (1  %  to  4  %)   Vijeta  scheme  is  not  for  retailers.   Field Sales Force:

Initiatives Taken to Improve The Distribution Network

Setting  up  of  a  full‐scale  sales  organization  comprising  key  account  management  and  activation  to  impact,  fully  engage   and  service  modern  retailers  as  they  emerge.  

Servicing  Channel  partners  and  customers  with  continuous  daily  replenishment.   

Leveraging  scale  and  building  expertise  to  service  Modern  Trade  and  Rural  Markets.  

Delaying  of  sales  force  to  improve  response  times  and service  levels

Launching  the  Unicare  scheme  with  upmarket  pharmacies  and  retailers  to  sale  its  premium  brands.  

Launching  of  several  promotional  schemes  for  existing wholesalers  and  distributors.

Field Force Management

In  HUL,  the  field  force  is  evaluated  using  QOC  (Quality  of  Contribution).  It  consists  of  4  components  ‐ 

  1.  Secondary  Sale  (Max  points  =  2.5)   2.  Eco  (Max  points  =  0.5)   3.  Focus  (Max  points  =  0.5)   4.  FCS  (Max  Points  =  0.5)  

Non Monetary Methods

Based  on  the  QOC  various  awards  are  distributed  to  the  field   persons  at  the  end  of  every  month.  These  awards  are  also  known  as  ‘MOC  Star’  awards.

If  QOC  score  >  4.5 - The  person  is  eligible  for  7  star  award  

If  QOC  score  >  4    - The  person  is  eligible  for  5  star  award  

If  QOC  score  >  3.5  -The  person  is  eligible  for  3  star  award  

Analytical Framework

We  tried  to  analyze  HUL’s  distribution  network  in  the  light  of 20  most  significant  variables  that  affect  the  distribution part  0f  channel  management  for  any  organization  in  the  business  of   marketing  &  selling  of  goods.  

1. No of Consumers 2. Geographic Dispersion Of Consumers 3. Frequency of purchase 4. Tendency to postpone purchase 5. Level  of  Familiarity/Knowledge  (of  consumer) 6. Degree of brand loyalty 7. Purchased on Impulse 8. level of Involvement(LOI) 9. Purchased as a Basket of Goods 10. Speed & complexity of Decision making process

Analytical Framework cont….

11. present of Expert influencer in the decision making process 12. Element of crisis purchase exists 13. Element of risk aversion exists 14. Perish ability of the product 15. Time band associated with the purchase of the product 16. Fungibility 17. Degree of customization possible 18. Negative/Positive reinforcing product 19. Value/Volume ration(value density) of the product

Financial Analysis

Marketing  Expenses   As  stated  earlier  also,  marketing  expenses  here  

include  the  following  –    - Commissions   - Rebates  29 - Discounts   - Sales  promotional   - Expenses  on  direct  selling  agents     - Entertainment  expenses  etc.  Distribution  Expenses   Distribution  expenses  include  the  outward  freight

 cost  to  the  company.   

Thank-You